SEC News Digest

Issue 2009-154
August 12, 2009

COMMISSION ANNOUNCEMENTS

SEC Suspends Trading In The Securities Of U.S. Canadian Minerals, Inc.

The Securities and Exchange Commission today announced the temporary suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934, of trading in the securities of U.S. Canadian Minerals, Inc., of McCarran, NV, at 9:30 a.m. EDT on August 12, 2009, and terminating at 11:59 p.m. EDT on August 25, 2009.

The Commission temporarily suspended trading in these securities because of questions that have been raised about the accuracy and adequacy of publicly disseminated information concerning, among other things, U.S. Canadian Minerals, Inc.'s liabilities, stock issuances, recent merger transaction, business prospects, and recently acquired purported assets.

U.S. Canadian Minerals, Inc., whose common stock is registered with the Commission pursuant to Section 12(g) of the Exchange Act, is quoted on the OTC Bulletin Board under the symbol USCN. See In the Matter of U.S. Canadian Minerals, Inc. (Rel. 34-60481)

ENFORCEMENT PROCEEDINGS

Initial Decision Barring Alan Brian Baiocchi Declared Final

The Commission has declared final the initial decision of an administrative law judge barring Alan Brian Baiocchi from association with any broker or dealer based on his conviction of wire fraud. The initial decision found that, on November 23, 2005, the United States District Court for the Central District of California, United States v. Baiocchi, 8:02 cr 00089 DOC (C.D. Cal. Nov. 23, 2005), aff'd, 2007 U.S. App. LEXIS 18494 (9th Cir. July 31, 2007), found Baiocchi guilty of two counts of wire fraud in violation of 18 U.S.C. S 1343. Baiocchi was sentenced to sixty three months imprisonment and ordered to pay restitution in the amount of $3,800,000.

The initial decision found that Baiocchi made false representations and material omissions in connection with the sale of investment interests in oil and gas programs, in violation of 18 U.S.C. S 1343, within the meaning of Sections 15(b)(4)(B) and 15 (b)(6)(A)(ii) of the Exchange Act. (Rel. 34-60483; File No. 3-13380)

In the Matter of AXA Advisors, LLC

On August 11, the Commission issued an Order Instituting Administrative Proceedings, Making Findings and Imposing Remedial Sanctions Pursuant to Section 15(b)(4) of the Securities Exchange Act of 1934 (Order) against AXA Advisors, LLC. The Order finds that AXA Advisors failed reasonably to supervise Gordon R. Moore, a registered representative who violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 from 2004 through 2007. Moore fraudulently induced investors, the majority of whom were current teachers in Colorado public schools, to consent to roll over their investments from their Colorado Public Employees' Association (PERA) 401(k) accounts into 403(b) products offered by AXA Advisors. The investors were not eligible to make the rollovers because they had not terminated their PERA-eligible employment or reached the age of 59-1/2. AXA Advisors failed to establish adequate procedures relating to rollover transactions.

AXA Advisors consented to the issuance of the Order without admitting or denying the findings therein. In determining whether to accept AXA Advisors' offer of settlement, the Commission considered the remedial acts promptly undertaken by AXA Advisors to make significant improvements to its supervisory system, and the cooperation afforded the Commission staff. Due in part to AXA Advisors' remedial acts, the participants ultimately incurred no monetary harm.

Based on the above, the Order censures AXA Advisors and orders it to pay a civil penalty of $50,000. (Rel. 34-60480; File No. 3-13577)

In the Matter of Gregg Thomas Rennie

An Administrative Law Judge has issued an Order Making Findings and Imposing Remedial Sanctions by Default (Default Order) in Administrative Proceeding No. 3-13496, Gregg Thomas Rennie. The Order Instituting Proceedings (OIP) alleged that, on May 18, 2009, the U.S. District Court for the District of Massachusetts issued a permanent injunction against Gregg Thomas Rennie. According to the OIP, the injunction bars Rennie from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The OIP further alleges that the district court ordered Rennie to pay disgorgement and prejudgment interest in the amount of $3,709,030, plus a civil penalty of $500,000.

The Default Order finds the allegations to be true. It concludes that, pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940, it is in the public interest to bar Gregg Thomas Rennie from association with any broker, dealer, or investment adviser. (Rels. 34-60482; IA-2913; File No. 3-13496)

In the Matter of Douglas K. Hutchins

On August 12, the Commission issued an Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order (Order) against Douglas K. Hutchins, a director of finance for the Global Business Markets unit of Qwest Communications International Inc. (Qwest). The Order finds that Hutchins violated Section 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act) and Exchange Act Rule 13b2-1, and was a cause of Qwest's violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1, and 13a-13 in connection with Qwest's June 30, 2001 quarterly report, September 30, 2001 quarterly report, and December 31, 2001 annual report, for Qwest's recognition of revenue in an improper bill and hold transaction with the Arizona School Facilities Board. Hutchins prepared documents that incorrectly supported immediate revenue recognition on the transaction.
Based on the above, Hutchins is ordered to cease and desist from committing or causing any violations and any future violations of Section 13(b)(5) of the Exchange Act and Rule 13b2-1 thereunder, and from causing any violations and any future violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder. Hutchins undertakes to cooperate in any related judicial or administrative proceeding or investigation commenced by the Commission or to which the Commission is a party. Hutchins consented to the issuance of the Order without admitting or denying any of the findings in the cease-and-desist proceeding.

In a related matter where the Commission had previously filed a complaint in the United States District Court for the District of Colorado against Hutchins seeking a civil penalty, Hutchins, without admitting or denying any of the allegations in the complaint, consented to the issuance of a Final Judgment against him ordering a $25,000 civil penalty. [SEC v. Douglas K. Hutchins, 1:03-cv-328 (D. Colo.).] (Rel. 34-60484; AAE Rel. 3034; File No. 3-13578)

In the Matter of William Herlyn

On August 12, the Commission issued an Order Making Findings and Imposing Remedial Sanctions and a Cease-and-Desist Order Pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 (Order) against William Herlyn. The Order finds that from 2003 until October 2008, Herlyn, who holds Series 7, 24, and 63 licenses, was employed by CentreInvest, Inc. (CI-New York), a registered broker-dealer located in New York, New York, and that from June 2006 until October 2008, Herlyn held the title of chief compliance officer at the firm. The Order further finds that OOO CentreInvest Securities (CI-Moscow), a Moscow-based broker-dealer and limited liability company specializing in the sale of second-tier Russian equities, was, during the relevant period, an affiliate of CI-New York. The Order further finds that from about 2003 through November 2007, CI-Moscow, which has never been registered with the Commission as a broker or dealer, directly and through CI-New York, Herlyn, and others, solicited institutional investors in the United States to purchase and sell thinly-traded stocks of Russian companies, without registering as a broker-dealer as required by Section 15(a) of the Exchange Act or meeting the requirements for the exemption from registration for foreign broker-dealers under Exchange Act Rule 15a-6(a). The Order further finds that Herlyn was responsible for CI-New York's filing of Forms BD that failed to disclose CI-Moscow's and its executive director's control of CI-New York, or that the license of the CI-New York's parent company had been revoked by the Cyprus SEC.

Based on the above, the Commission orders Herlyn to cease and desist from committing or causing violations and any future violations of Section 15(a) of the Exchange Act, and causing violations and any future violations of Section 17(a) of the Exchange Act and Rule 15b3-1 thereunder, suspends Herlyn from association with any broker or dealer for a period of three months, orders Herlyn to pay a $10,000 civil penalty, and orders Herlyn to comply with his undertaking to provide the Commission, within thirty days after the end of the three month suspension, with an affidavit stating that he has complied with the suspension. Herlyn consented to the issuance of the Order without admitting or denying the findings in the Order. (Rel. 34-60485; File No. 3-13304)

The Commission announced today that on Aug. 7, 2009, the Honorable Sidney H. Stein, of the United States District Court for the Southern District of New York, entered a final judgment against Edwin "Bucky" Lyon, IV, Gryphon Master Fund, L.P., Gryphon Partners, L.P., Gryphon Partners (QP), L.P., Gryphon Offshore Fund, Ltd., Gryphon Management Partners, L.P., Gryphon Management Partners III, L.P., and Gryphon Advisors, L.L.C. (collectively, Gryphon Partners) in SEC v. Edwin B. Lyon, IV, et al., 06 Civ. 14338 (S.D.N.Y.), an insider trading case the Commission filed on December 12, 2006. The Commission's complaint against Lyon and Gryphon Partners alleged that they violated the antifraud provisions of the federal securities laws in connection with four PIPE (an acronym for private investment in public equity) offerings.

Without admitting or denying the allegations in the complaint, Lyon and each Gryphon Partners entity consented to the entry of a final judgment permanently enjoining them from future violations of the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934 (specifically, Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Exchange Act Rule 10b-5). The final judgment also orders Lyon and Gryphon Advisors, L.L.C. to pay, jointly and severally, disgorgement of $66,712, plus prejudgment interest of $33,850, and a civil penalty of $310,288, and further orders Gryphon Master Fund, L.P., Gryphon Partners, L.P., Gryphon Partners (QP), L.P., Gryphon Offshore Fund, Ltd., Gryphon Management Partners, L.P., and Gryphon Management Partners III, L.P. to pay, jointly and severally, disgorgement in the amount of $243,576, plus prejudgment interest of $123,590.

The Commission's complaint alleged that, in connection with four separate PIPE offerings, Lyon and Gryphon Partners, after being solicited to invest, engaged in illegal insider trading by selling short the PIPE issuers' securities prior to the public announcement. Lyon and Gryphon Partners engaged in this conduct notwithstanding their agreement to keep information about the PIPE confidential.

Commission Charges Florida Attorney With Stock Manipulation; Attorney Also Pleaded Guilty To Misprision of a Felony

On July 31, 2009, the Commission filed a civil action in the United States District Court for the Southern District of Florida against L. Daniel Ferrer, a Florida attorney, alleging violations of the federal securities laws in connection with the manipulation of stock in Weida Communications, Inc.

According to the Commission's complaint, from approximately June 2004 through April 2005, a group of promoters and brokers manipulated the market price for Weida common stock to approximately $5 per share in part to facilitate the sale of stock in private transactions for approximately $3 per share. The Commission alleges Ferrer used brokerage accounts opened in his name and that of his law firm to execute manipulative trades in Weida common stock. Ferrer was an attorney licensed to practice law in the State of Florida and outside counsel for Weida. The SEC further alleges that Ferrer falsely testified under oath when questioned by the staff about his trading activity during the investigation. The SEC charges Ferrer with violations of Section 10(b) Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder and seeks as relief a permanent injunction, disgorgement with prejudgment interest, a civil penalty and penny stock bar. Without admitting or denying the allegations against him, Ferrer consented to a permanent injunction and penny stock bar. Ferrer also consented to an administrative order permanently suspending his privilege of appearing or practicing before the Commission as an attorney.

On April 6, 2009, Ferrer was arrested on related criminal charges brought by the United States Attorney's Office for the Southern District of Florida [United States of America v. L. Daniel Ferrer, Case No. 09-60069-CR (Cohen J/Seltzer MJ)]. On May 19, 2009, Ferrer pleaded guilty to misprision of a felony pursuant to 18 U.S.C. S 4. Ferrer's sentencing is scheduled for Aug. 27, 2009. The Commission acknowledges the assistance of the United States Attorney's Office for the Southern District of Florida, Federal Bureau of Investigation and Florida Office of Financial Regulation. For additional information, see LR-20456 (Feb. 13, 2008), LR-19843 (Sept. 21, 2006), LR-19525 (Jan. 10, 2006) and LR-19858 (Oct. 4, 2006). [SEC v. L. Daniel Ferrer, Case No. 09-CV-61154-Cohen-Seltzer (S.D. Florida)] (LR-21176)

SEC Charges Terex Corporation with Accounting Fraud

The Commission today charged Terex Corporation, a Westport, Conn.-based heavy equipment manufacturer, with accounting fraud for making material misstatements in its own financial reports to investors, as well as aiding and abetting a fraudulent accounting scheme at United Rentals, Inc. (URI), another Connecticut-based public company.

Terex has agreed to settle the SEC's charges and pay a penalty of $8 million. The SEC previously charged URI with fraud as well as officers of URI and Terex.

The SEC's complaint, filed in U.S. District Court for the District of Connecticut, alleges that Terex aided and abetted the fraudulent accounting by URI for two year-end transactions that were undertaken to allow URI to meet its earnings forecasts. These fraudulent transactions also allowed Terex to prematurely recognize revenue from its sales to URI. The fraud occurred through URI's sales of used equipment to a financing company and its lease-back of that equipment for a short period. As part of the scheme, Terex agreed to sell the equipment at the end of the lease period and guarantee the financing company against any losses. URI separately guaranteed Terex against losses it might incur under the guarantee it had extended to the financing company.

The SEC's complaint also alleges that from 2000 through June 2004, Terex's accounting staff failed to resolve imbalances arising from certain intercompany transactions. Instead of investigating and correcting the imbalances, Terex offset the imbalances with unsupported and improper entries. As a result, costs were not recorded as expenses, and, on a consolidated basis, Terex appeared to be more profitable than it was.

Without admitting or denying the SEC's charges, Terex agreed to settle the Commission's action by consenting to be permanently enjoined from violating Section 17(a) of the Securities Act of 1933, and from violating and aiding and abetting any violation of Sections 10(b), 13(a), and 13(b)(2)(A) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-1, and 13a-13 thereunder, and by paying the $8 million penalty. The settlement is subject to court approval.

The Commission acknowledges the assistance of the U.S. Attorney's Office for the District of Connecticut and the New Haven Field Office of the Federal Bureau of Investigation in this matter.

INVESTMENT COMPANY ACT RELEASES

Reaves Utility Income Fund, et al.

An order has been issued on an application filed by Reaves Utility Income Fund (UTG) and W.H. Reaves & Co., Inc. under Section 6(c) of the Investment Company Act for an exemption from Section 19(b) of the Act and Rule 19b-1 under the Act. The order permits UTG to make periodic distributions of long-term capital gains (i) with respect to its outstanding common shares as frequently as twelve times each year, and (ii) as frequently as distributions are specified by or in accordance with the terms of any preferred shares that UTG may issue. (Rel. IC-28843 - August 11)

The Alger Funds, et al.

An order has been issued on an application filed by The Alger Funds, et al. under Section 6(c) of the Investment Company Act for an exemption from Sections 18(f) and 21(b) of the Act, under Section 12(d)(1)(J) of the Act for an exemption from Section 12(d)(1) of the Act, under Sections 6(c) and 17(b) of the Act for an exemption from Sections 17(a)(1), 17(a)(2) and 17(a)(3) of the Act, and under Section 17(d) of the Act and Rule 17d-1 under the Act to permit certain joint arrangements. The order permits certain registered open-end management investment companies to participate in a joint lending and borrowing facility. (Rel. IC-28844 - August 11)

SELF-REGULATORY ORGANIZATIONS

Approval of Proposed Rule Changes

The Commission approved a proposed rule change filed by NASDAQ OMX PHLX (SR-Phlx-2009-54), under Section 19(b)(2) of the Securities Exchange Act of 1934, to establish fees for the Top of Phlx Options direct data feed product. Publication is expected in the Federal Register during the week of August 17. (Rel. 34-60459)

The Commission granted approval of a proposed rule change (SR-NYSEArca-2009-55) submitted by NYSE Arca, through its wholly owned subsidiary, NYSE Arca Equities, Inc., to list and trade shares of the Dent Tactical ETF. Publication is expected in the Federal Register during the week of August 17. (Rel. 34-60460)

The Commission granted approval of a proposed rule change submitted by NYSE Arca (SR-NYSEArca-2009-52) to amend the Schedule of Fees and Charges for Exchange Services. Publication is expected in the Federal Register during the week of August 17. (Rel. 34-60468)

Immediate Effectiveness of Proposed Rule Changes

A proposed rule change filed by NASDAQ OMX PHLX (SR-Phlx-2009-66) relating to fee waivers has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of August 17. (Rel. 34-60461)

A proposed rule change filed by BATS Exchange relating to fees for use of BATS Exchange, Inc. (SR-BATS-2009-027) has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of August 17. (Rel. 34-60464)

A proposed rule change filed by the NYSE Arca (SR-NYSEArca-2009-73) amending Rule 6.76A - Order Execution-OX and proposing new Rule 6.88 - Directed Orders has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of August 17. (Rel. 34-60469)

Proposed Rule Changes

The Financial Industry Regulatory Authority filed a proposed rule change (SR-FINRA-2009-050) under Section 19(b)(1) of the Securities Exchange Act of 1934 relating to FINRA Rule 8312 (BrokerCheck Disclosure). Publication is expected in the Federal Register during the week of August 17. (Rel. 34-60462)

The Commission issued notice of a proposed rule change submitted by NASDAQ OMX PHLX (SR-Phlx-2009-65) pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 relating to strike price intervals of $0.50 for options on stocks trading at or below $3.00. Publication is expected in the Federal Register during the week of August 17. (Rel. 34-60466)